Aug. 11, 2009,

You're ESPECIALLY likely to default, moreover, if you're deeply underwater.

In the last housing bust, house prices in Massachusetts fell about 16% (see chart).  Approximately 7% of borrowers who were underwater defaulted.

7% isn't that bad, but for four reasons, DB's Karen Weaver thinks the impact will be much worse this time around:

• The house price drop is much worse, so borrowers are more deeply underwater. The Mass drop was 16%.  We're already at 33% nationally.

• Superior borrower quality in the Massachusetts data. More prime, conforming mortgage loans

• More fixed-rate loans in the Massachusetts data.

• Lower unemployment. Mass unemployment peaked at 9.1%.  We're now at 9.4% nationwide.

So, bottom line, more negative equity will lead to more foreclosures.

On a positive note, the level of foreclosures would have to be vastly higher than the Massachusetts data to really surprise anyone at this point.  If 20% of the 25 million households that slip underwater default (3X the Massachusetts rate), that will be 6 million foreclosures.  Most analysts are already expecting numbers in that range.

http://www.businessinsider.com/henry-blodget-half-of-us-homeowners-underwater-by-2011-2009-8#so-what-does-all-this-mean-18

Comments (3)

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written by joan Lispier, November 06, 2009

Is it geting any better no wose day by day

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written by m whyte, October 30, 2009

underwater is perhaps better than being on fire

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written by Valdirene Ribeiro, October 29, 2009

withone make just a litlle part ... the world will meet god

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